Private sector fix for low reserves
L-R) Novaline Brewster, Public Affairs Officer at the Central Bank of Barbados (CBB); Acting Governor of the Central Bank, Cleviston Haynes and Deputy Governor, Michelle Doyle-Lowe.
The Central Bank of Barbados (CBB) has announced they will be turning to the private sector in an attempt to bolster the level of foreign reserves, in light of government's failed attempts to finalize the sale of its assets.
Word of this came from the CBB Governor Cleviston Haynes during yesterday's economic review of Barbados' first quarter performance.
For the last two quarters the island has been battling with low levels of foreign reserves with reserves falling as low as $410 million, equivalent to 6.6 weeks of import cover, at the end of December last year. In the CBB's third quarter review done last October, the reserves stood at $549.7 million - equivalent to 8.6 weeks.
Up to the end of March 2018, the level of reserves rose to $423 million, 6.9 weeks of import cover, with a major portion of the funds coming from tourism receipts during the winter season.
Haynes said the stalled divestment of government assets, particularly the Barbados National Oil Terminal Limited (BNTCL) and the Hilton Hotel, valued at $180 million US in total, is but one of the reasons the level of reserves remain low.
He explained, as was the case in 1991 when the country was going through fiscal adjustment, the CBB intends to carry out an exercise with the private sector to allow them to pledge their foreign assets to the Bank. He said the CBB will be seeking $60 - 70 million from the private sector.
"I think the private sector will be willing to act in the national interest. I think it is not a situation where one is trying to deprive them of their foreign assets. It is really to leverage their foreign assets in order to get us the funds so they don't necessarily have to liquidate but they are able to use it as security."
This is something we have done before and it is desirable at this time to ensure we maintain adequate reserve buffers. Clearly it is not enough, it needs to be supported by the completion of the asset sales."
Despite the large foreign debt payment on the Credit Suisse loan due in June, Hayne said he believes the reserves situation will improve over the next quarter.
"We anticipate that we would be able to stabliize the foreign reserves in the second quarter once we start to receive those funds."
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